Page 1

B30A

KiwiSaver annual report 2017


Purpose of this report

Registered KiwiSaver schemes

The main objective of the Financial Markets Authority (FMA) is to promote the development of fair, efficient and transparent financial markets.

Amanah KiwiSaver Plan

Our aim across all our activities is to raise the standard of conduct, and increase investor and market confidence to support economic growth in New Zealand. We are one of several government agencies with a role in regulating KiwiSaver, which amounts to a substantial part of New Zealand’s collective wealth. For many New Zealanders, KiwiSaver may be their first investment and may be a large part of their retirement savings and ultimate financial security. We are required to report each year on our main KiwiSaver activities. This year’s report covers the period from 1 July 2016 to 30 June 2017, and contains a summary of the statistical returns required to be lodged by KiwiSaver schemes as at 31 March 2017.

AMP KiwiSaver Scheme ANZ Default KiwiSaver Scheme ANZ KiwiSaver Scheme Aon KiwiSaver Scheme ASB KiwiSaver Scheme BCF KiwiSaver Scheme BNZ KiwiSaver Scheme Booster KiwiSaver Scheme Craigs KiwiSaver Scheme Defence Force KiwiSaver Scheme Fisher Funds KiwiSaver Scheme Fisher Funds TWO KiwiSaver Scheme Generate KiwiSaver Scheme Kiwi Wealth KiwiSaver Scheme Koinonia KiwiSaver Scheme

More information Along with this report, we have published an interactive online report showing key trends based on the information given to us by KiwiSaver providers. Visit the FMA website to view this report.

Lifestages KiwiSaver Scheme Maritime KiwiSaver Scheme Medical Assurance Society KiwiSaver Plan Mercer KiwiSaver Scheme Milford KiwiSaver Plan NZ Funds KiwiSaver Scheme OneAnswer KiwiSaver Scheme QuayStreet KiwiSaver Scheme Simplicity KiwiSaver Scheme Smartshares KiwiSaver Scheme Summer KiwiSaver Scheme SuperEasy KiwiSaver Superannuation Scheme SuperLife KiwiSaver Scheme Westpac KiwiSaver Scheme

ISSN No. 2324-5522 (Print) | ISSN No. 2324-5530 (Electronic) Presented to the House of Representatives pursuant to Section 159 of the KiwiSaver Act 2006

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KiwiSaver annual report 2017 | Financial Markets Authority

Contents Executive summary

2

Key trends

4

Key activities

8

Focus area: transferring-out times

10

Default scheme member engagement: encouraging informed decision-making

11

Facts at a glance

16

Appendices Appendix 1

Income and expenditure summary

17

Appendix 2

Membership summary

18

Appendix 3

Age and gender profile of members

20

Appendix 4

Profile of new default and other members

21

Appendix 5

Summary of non-contributing members

22

Appendix 6

Investment fund summary

22

Appendix 7

Switches out of default investment product into other investment funds

23

Switches between investment funds

24

Appendix 8

Profile of switches between investment funds

25

Appendix 9

Analysis according to size of scheme assets

25

Appendix 10 Analysis by nature of scheme

26

Appendix 11 Analysis according to nature of scheme and size of scheme assets

27

1


Financial Markets Authority | KiwiSaver annual report 2017

Executive summary In the year to 31 March 2017 – the period covered by the statistics we receive from KiwiSaver providers – gross investment returns for KiwiSaver schemes more than doubled compared with 2016, up $1.4 billion (108%), from $1.3 billion in 2016 to $2.7 billion this year.

Overall increase in assets Total KiwiSaver assets rose $7 billion (20.7%). There were increases in all types of contributions apart from the Crown. Standard member contributions increased by $400 million (13.7%), and lump sum contributions rose $59.7 million (15.2%). Employer contributions increased $200 million (11%) to $1.8 billion. However, Crown contributions declined $31 million (4.3%) to $697 million, down from $728 million in 2016. This is in line with a rise in the number of noncontributory members, who do not qualify for the Member Tax Credit (MTC).

First-home withdrawals Over the year, 30,256 members withdrew $614 million to help purchase their first home. This is $118 million (23.8%) more than the $496 million withdrawn in 2016, and a significant increase on the 2015 figure ($214 million). The average withdrawal in 2017 was just over $20,000.

Financial hardship withdrawals More people are withdrawing money because of serious financial hardship. This year, the average withdrawal was $5,786.

Financial hardship withdrawals

13,970 members

Overall this year, total KiwiSaver membership increased 4.4% to 2,722,147. This was an increase of 113,764 members since 2016. However, year-on-year overall growth figures declined, dropping from 8.3% in 2015, to 4.8% in 2016, to 4.4% this year.

withdrew

$81 million

Scheme transfers For the second year in a row, the number of members who transferred between schemes outnumbered new members. In 2017, 172,017 members transferred between schemes and 154,531 people joined KiwiSaver – compared to 2016, when 173,272 people transferred between schemes and 145,856 people joined.

2

up on last year

25%


KiwiSaver annual report 2017 | Financial Markets Authority

Default schemes

Changes during the year

The nine default schemes increased their combined assets to $4.6 billion in 2017, up from $4.2 billion last year. However, their share of total KiwiSaver scheme assets continued to slide, from 12.5% to 11.3%. The default schemes’ share of total membership also continues to fall, down to 16.4%, from 17.1% in 2016, as members switch to other funds within their provider’s scheme or transfer to other schemes. In total, 75,155 KiwiSaver investors switched or transferred out of default schemes in the period, taking just over $700 million in assets with them.

This year, the Government announced that from 2018 all KiwiSaver annual member statements must show in dollars the sum of the fees each member has been charged. We welcome this change, which will make the individual fee information in annual statements more meaningful and engaging.

16,902 people switched approximately $173 million to other funds within their provider’s scheme and 58,253 transferred $529.3 million to other providers.

Switches within their provider’s scheme

Switches to other provider’s schemes

16,902 KiwiSaver investors

58,253 KiwiSaver investors

switched

switched

$173 million

$529.3million

Default member engagement Since 2016, when we first reported on the success of KiwiSaver providers’ financial literacy efforts, we have taken steps to promote further member engagement by providers. However, this year’s statistics show that, overall, the results are worse. We accept that major changes can’t be achieved overnight, but this is a disappointing trend that needs to be remedied. As part of our ongoing discussions with default providers, we have reminded them that default status comes with strong commercial benefits. But it also comes with a responsibility to address the financial literacy of their members.

Also, in June, the Minister announced the planned introduction of retirement savings and income projections in all KiwiSaver annual statements.

Behavioural insights In 2017, we released the results of our first behavioural insights trial, which examined some simple ways to improve engagement with default KiwiSaver members. Working with the Commission for Financial Capability (CFFC) and the Inland Revenue Department (IRD), we introduced a flyer into the IRD’s welcome pack to encourage new KiwiSaver members to make positive decisions about their financial future. As part of the transfer-out process, we looked at transfer procedures and their length. The results were positive: 97.5% of default-scheme transfers were within the required 10-day timeframe, and 99.4% of other KiwiSaver schemes met their 35-day requirement. As the conduct regulator of KiwiSaver, we continue to focus on the transparency of KiwiSaver providers and the decisionmaking tools and abilities of KiwiSaver members.

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Financial Markets Authority | KiwiSaver annual report 2017

Key trends The following statistics are from the 2017 annual statistical returns for the period 1 April 2016 to 31 March 2017* Membership

Fees

Scheme membership increased from just over 2.6 million to 2.7 million. This is a 4.4% increase during 2017. Below we show the year-on-year increases.

Investment management fees rose $46.8 million (21.3%), from $219.5 million in 2016 to $266.3 million in 2017. Per member, the average investment management fee paid increased from $84.15 in 2016 to $97.82**. Administration fees rose $4.6 million (5.9%), from $77.8 million to $82.4 million. Per member, the average administration fee paid increased from $29.84 in 2016 to $30.28. As a percentage of investment returns, investment management fees dropped from 16.87% to 9.84% (a 41.7% decline).

4.4% 4.8% 8.3% 9.6% Investment management fees (2016 to 2017)

$46.8 million

$13.67 average per member

Administration fees (2016 to 2017)

$4.6 million

$0.44 average per member

2017 2016 2015 2014 The number of contributing members rose from 1,494,231 to 1,572,693. New members joining a scheme for the first time was 154,531. Net new members after permanent withdrawals and other exits was 121,913.

2017

172,017 members transferred

2016

173,000 $1.98 billion members transferred

$2 .014 billion

Earnings

Contributions

The gross amount earned from the investment of scheme assets rose $1.4 billion (108%) to $2.7 billion, a marked increase from $1.3 billion in 2016 – but slightly short of the $3 billion earned in 2015.

Crown contributions declined further from $728 million in 2016 to $697 million this year, a slip of 4.3%. This is in line with the rise in the number of non-contributory members, who do not qualify for the member tax credit.

Scheme assets rose

108

%

*Unless another source of data is noted.

4

Transfers between non-default KiwiSaver schemes

Employer contributions increased from $1.6 billion to $1.8 billion, while member contributions increased from $3.2 billion in 2016 to $3.6 billion. As part of this, lump sum payments increased from $394 million in 2016 to $453 million; and other voluntary contributions rose slightly from $149 million to $155 million.

crown contributions

$31 million

employer contributions

$200 million

**Based on average member balance of $15,000.

member contributions

$400 million


KiwiSaver annual report 2017 | Financial Markets Authority

Non-contributing members

Transfers from other superannuation schemes

At the end of March 2017, just over 1.1 million members were not contributing to their KiwiSaver funds. Although the number of non-contributing members increased by 3.2%, the proportion of non-contributing members dropped slightly to 42.2%, from 42.7% at the end of 2016.

Over million was transferred into KiwiSaver schemes from overseas and other registered superannuation schemes this year.

Non-contributing members are members on PAYE remuneration who:

• • •

$172.5 25%

This is a increase on 2016, though still down on the $232 million transferred in 2015. Transfers from Australian schemes increased to $116.5 million, from $98 million in 2016. Transfers from other schemes increased

Have not made a KiwiSaver contribution in the two months before 31 March 2017 Have failed to make contracted payments, or Are on a contributions holiday.

Of these non-contributing members 428,836 were either over 66 years or younger than 17 years. Some non-employee members chose to make lump-sum contributions in the months leading up to 30 June, rather than making regular contributions throughout the year. These members are seen as contributory members.

to $55.9 million, from $40 million, still well down on a high of $154 million in 2015. Going the other way across the ditch, since full trans-Tasman superannuation portability came into effect three years ago, payments from KiwiSaver schemes into Australian superannuation schemes have continued to creep upwards: from $1.1 million in 2015, to $2.9 million in 2016, to $3.1 million in 2017.

$116.5

Trans-Tasman superannuation transfers 2017

million

$3.1

million

Types of schemes KiwiSaver members who don’t choose their own schemes are automatically enrolled in one of nine default schemes: AMP, ANZ Default, ASB, BNZ, Booster, Kiwi Wealth, Mercer, Fisher Funds TWO and Westpac. Default membership increase

Total membership increase

1,748

113,764

2017 446,534 2016 444,786

2017 2.7 million 2016 2.6 million

The total number of retail schemes chosen by members increased from 24 to 25. During the year, the total assets of retail schemes grew

$6.6 billion

2017 $35.4 billion 2016 $28.8 billion

an increase of nearly

23%

The number of restricted schemes (those aimed at specific groups) declined further, from eight to five. As a result, the total membership of restricted schemes dropped very slightly from 25,845 to 25,235; however, total assets rose from $692 million to close to $800 million. 5


Financial Markets Authority | KiwiSaver annual report 2017

Withdrawals From the total withdrawals this year (over $1.4 billion), $631 million went to retirees, up from $513 million in 2016. Withdrawals for first-home purchases rose from $496 million to $614 million this year. Withdrawals for serious financial hardship rose by nearly 25%, from $65 million to almost $81 million. Permanent emigration withdrawals also rose, from $19 million in 2016 to $28 million in 2017.

Members withdrew over

$1.4 billion

first home buyers

$631million $614million

Exempt employers and complying superannuation funds The number of exempt employers and complying superannuation funds declined. At the end of June 2017, 234 private-sector employers were exempt from enrolling new employees into KiwiSaver, down from 255 in 2016. There were 16 complying superannuation funds at the end of June 2017 registered on the Disclose Register, compared with 19 in 2016.

Employer preferred KiwiSaver schemes A growing number of employers are selecting preferred KiwiSaver schemes their new employees can enrol in. This year, 20,004 employers had notified the IRD of their preferred schemes, up from 19,475 last year.

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retirees

hardship

$81million

Membership profile

emigration

$28million

51%

The ratio of female to male KiwiSaver members remains the same

49%

year year year year olds 18-35 olds 36-50 olds 51-65 olds >65 olds <17 year

12.2% 36.5% 25.6% 22.1% 3.6% 2016 13.4%

2016 Stable

2016 25.3%

2016 Stable

2016 3.4%

Size of schemes

Number of schemes

Two KiwiSaver schemes manage more than $5 billion in assets, while 10 manage over $1 billion. Together these schemes represent nearly 94% of members, up from 87% in 2016. There are now fewer schemes with under $10 million in assets, down from seven in 2016 to only three this year â&#x20AC;&#x201C; with a membership of only 1,618.

There are now 30 retail and restricted KiwiSaver schemes, down from 32 in 2016. The two schemes deregistered to 30 June 2017 were Seafarers KiwiSaver Scheme and Tait Communications KiwiSaver Scheme.


Financial Markets Authority | KiwiSaver annual report 2017

Key activities The following activities relate to the period 1 July 2016 to 30 June 2017

Annual statements From 2018, all KiwiSaver annual member statements will need to show the total amount of fees charged in dollar terms. We want annual statements to be a tool to enable New Zealanders to make better decisions about their KiwiSaver. This is a direct result of our work and research with the Ministry of Business, Innovation and Employment (MBIE). During the year, we consulted with industry to decide how to ensure that investors receive the information in an accurate and consistent way. The resulting fees methodology was finalised in July 2017, after the reporting period. We are encouraging providers to show the fees as a percentage. This helps investors to make an easy comparison between their provider and others. We want to see providers showing their fees in both dollar value and as a percentage – and we are encouraging providers to do this. In June 2017, the Minister announced retirement savings and income projections will also be included in KiwiSaver annual statements. We will be working with MBIE and the CFFC on the details and timeframes of these changes.

KiwiSaver advice guidance In November 2015, we published a report on sales and advice practices*. In the report we noted that just three out of every 1000 KiwiSaver members, at the date of publication, received advice about transferring their KiwiSaver fund. Since then, we received feedback from providers that our 2012 KiwiSaver sales and advice guidance was a barrier to

members getting the help they needed to make informed decisions about their KiwiSaver. We took on board this feedback and revised our KiwiSaver sales and advice guidance, published in March 2017. The revised guidance encourages providers to give members advice in four key areas:

KiwiSaver works and why it’s • How important to be in it • Choosing the correct contribution rate • Identifying the right type of fund • How to choose the correct tax rate. The report also focused on transfer behaviour. The guidance shows how to do this on a class basis, and also covers the use of incentives. Our view is that incentives can be offered, as long as they don’t distract a customer from making good decisions. We’ve received feedback that some providers are now updating their sales and advice practices. To help KiwiSaver members make informed decisions about their investments, we also released a guide for consumers on the factors they should consider when thinking about changing providers.

Behavioural insights research In June, we released the results of our first behavioural insights trial. Working with Kiwi Wealth, we found that making content and layout changes to default member welcome communications meant members were more likely to move out of default funds, and less likely to transfer to another provider.

*fma.govt.nz/assets/Reports/151117-Sales-and-advice-report.pdf

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KiwiSaver annual report 2017 | Financial Markets Authority

A second trial, with ANZ, is now underway. This trial will test whether using messages such as ‘most New Zealanders seek advice at this age’ can prompt more ANZ KiwiSaver members to get retirement advice, or use retirement planning tools when they hit 56 years old. Other providers have also expressed interest in participating in trials over the coming year. We also worked with the CFFC and the IRD to insert a flyer into the packs the IRD sends to new default KiwiSaver members. In the first two months the flyer was included in the packs, opt-out rates declined, although it is too early to be confident there is a link.

50%

received old letter (Control group)

3,427

KiwiSaver fund members in the trial

50%

received new letter (Treatment)

Reviewing disclosure We have reviewed the product disclosure statements for all KiwiSaver providers as part of the final transition to the FMC Act. We also provided guidance on the preparation of the new fund updates and on the information that must now be included on the Disclose Register. We have started drawing data from the Disclose Register to help with our reporting, and are currently exploring publicly releasing KiwiSaver fee and performance information.

KiwiSaver working group We have been working with an industry working group (members include KiwiSaver providers, the Financial Services Council and Workplace Savings and the CFFC) to develop an industry glossary of terms. The glossary will ensure investors receive consistent explanations of technical terms.

Ongoing activities

• • Clear call to action

Simplified layout with 3 easy steps

Social norming messages — you’ve joined others, 9 out of 10 have made a choice

Working with IRD to manage the registering and deregistering of schemes Continuing to manage the Default Monitoring Panel, which supervises the nine default schemes. Administering the KiwiSaver exempt employers register. From 1 December 2016, the complying superannuation funds register ceased to be a standalone register. The information about complying superannuation funds is on the Disclose Register. Promoting KiwiSaver messages to consumers using various media channels.

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Financial Markets Authority | KiwiSaver annual report 2017

Focus area: transferring-out times We asked KiwiSaver providers for data on member transfers out of their schemes from 1 October to 31 December 2016. We analysed whether providers had met their obligations to transfer members in the timeframes prescribed by law, which is 10 days for default KiwiSaver schemes and 35 days for other KiwiSaver schemes. We found a small number of transfers out failed to meet the legal requirements. For default schemes, 97.5% of transfers happened within 10 days. Other KiwiSaver providers generally took longer, with 79.8% transferring within 20 days, and 99.4% meeting their 35-day time standard. Number transferred

Number outside Percentage outside time standard time standard

Default KiwiSaver schemes

11,266

281

2.5%

Other KiwiSaver schemes

25,800

158

0.6%

We asked those who didn’t meet the standard legal timeframe why this was. The key themes of their responses included:

• • • •

10

Mismatched data Waiting on information from the transferee provider Processing delays Mistakenly relied on future-dated payments (three days) as falling within the legislative requirement.

Our focus on transfer times has led to supervisors updating their reporting requirements so they are alerted to outstanding transfers out more quickly. Several other KiwiSaver providers have streamlined their processes and are escalating any issues after 20 days, rather than after the 35-day legal timeframe. We made it clear to all providers that they must complete end-to-end transfer out within the legal timeframe. This means money must be actually in the member’s new account within 35 days, not just set up to be paid. Some providers told us they’ve started thinking about how to make the transferout process better for their customers. We would encourage all providers to consider how to keep their departing and incoming customers informed about the transfer process.


KiwiSaver annual report 2017 | Financial Markets Authority

Default scheme member engagement: encouraging informed decision-making Background KiwiSaver providers with default scheme status are allocated new KiwiSaver members to their default fund by IRD on a regular basis. Default status is financially rewarding for these providers, but the status comes with conditions. Breaches of those conditions can lead to termination or suspension of their default status by the Minister of Commerce. Since July 2014, default providers’ responsibilities have included addressing the financial literacy of their members – particularly in default schemes. This recognises that default members are new to KiwiSaver and may have lower levels of knowledge about it. Consequently, they probably have not made an active decision to choose the default fund. These members

may end up staying put in the default fund, rather than making an active choice.

have been clear that we expect to see improvement in both effort and results.

The financial literacy responsibility requires providers to report to us quarterly, about:

2017 results

• •

How they engaged with their default members to encourage them to choose an investment. The number of default members making an active fund choice.

We regard active choice as important, as it indicates the provider has genuinely engaged with its members to help them make informed decisions. We first reported on the success of KiwiSaver providers’ financial literacy efforts in 2016. Those results were considered a baseline. Since then we

As the table below shows, for four of the nine default KiwiSaver providers, the results are worse than in 2016. This is disappointing to see. Again, this year we contrasted each provider’s success rate against transfers in and out of their scheme to show barriers to contacting members are surmountable. It is also important to point out the steady increase in fee income from default members, despite numbers in these funds declining. We have provided more detail in the table on page 15 titled Average fees paid by KiwiSaver members in default schemes.

Summary of default KiwiSaver scheme members 2016 Provider

2017

Default members

Active choice (%)

Active choice (no.)

Default members

Active choice (%)

Active choice (no.)

ANZ

79,437

6%

4,868

75,927

5%

3,651

AMP

133,526

8%

11,007

118,529

2%

2,286

ASB

94,870

1.5%

1,441

92,520

1.5%

1,394

Fisher

73,703

4%

2,781

71,498

5%

3,462

Mercer

91,802

5%

5,033

85,571

3%

2,553

BNZ

12,548

3%

355

17,939

3%

449

Booster (Grosvenor)

10,229

22%

2,205

14,278

9%

1,282

KiwiWealth

11,954

4%

478

17,655

4%

624

Westpac

11,891

4%

440

17,762

7%

1,201

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Financial Markets Authority | KiwiSaver annual report 2017

Summary of member transfer activity

Provider

Our view

Transferring in

Transferring out

Members from other providers schemes transferring in to the named provider’s scheme

Default members from the named scheme transferring out to another provider’s scheme

2016

2017

2016

2017

ANZ

35,711

30,908

10,139

9,373

AMP

13,158

4,193

21,498

11,982

ASB

27,000

24,825

8,739

8,286

Fisher

9,021

14,550

8,770

9,299

Mercer

11,703

2,619

12,670

9,847

BNZ

14,206

14,114

1,644

2,675

4,488

4,653

2,988

2,785

KiwiWealth

16,766

19,558

1,554

1,754

Westpac

19,771

25,566

1,328

2,252

Booster (Grosvenor)

This is the second year we have reported these results. At this stage, we don’t think it’s appropriate to use our powers under the KiwiSaver Act* to require remedial action from providers to address this issue. But, we do think it is clear that default providers need to do more to better engage their members. So, we’ve communicated our concerns to the CEOs of default providers as follows:

• •

When we asked providers why their active choice results were declining, they told us:

• • •

It was too soon to tell if efforts were successful The efforts they made were unsuccessful (in some cases, there is little evidence the provider tried anything else)

Other work took priority (such as the Financial Markets Conduct Act transition).

We accept we need to be realistic about how quickly, and by how much, active choice results improve. We also acknowledge that in some cases, the investors that are easier to engage with have already chosen another fund. This means the remaining default scheme members can pose more of a challenge when it comes to engagement. However, we still expect providers to review their results again and see if they have done enough to engage with their members.

We expect efforts and results to improve We expect the undertakings about addressing the financial literacy of their members, made in their tender for default status, are delivered upon, or updated to something more effective We want reporting on their broader education initiatives for all members – not only default members – to focus not just on what they are doing, but to evaluate their effectiveness Their member financial literacy efforts will form part of our ongoing engagement with them through the default monitoring panel, supervisory visits and other meetings We are prepared to partner with them in behavioural insights trials, to address default member engagement or other challenges.

We expect each provider to stick to the promises they made in their tender for default status.

*Under the KiwiSaver Act we are able to require any default provider to take remedial action to address breaches of their Instrument of Appointment. Further, if the remedial action is not done, or unsatisfactory, we can recommend the Minister of Commerce suspend new allocations of default members to the provider concerned, or even terminate their default status.

12


Financial Markets Authority | KiwiSaver annual report 2017

Providers’ results Phone calls and personal interaction Talking to default members about their options over the phone is the most successful approach. One provider reported that 85% of members they contacted made an active choice after an initial phone call. Process changes Removing barriers such as the need for members to have ID verification before they can switch funds significantly lifted active choice for one provider. Several providers also achieved improvements by implementing online fund switches. Efforts to improve member contact details Initiatives include employer information to contact difficult-to-reach members, and incentive campaigns to encourage members to update their own details. More than one follow-up Some providers trialled a series of followup emails using different or progressively stronger subject lines. Others use a pop-up reminder function within their online tools. Changes based on behavioural insights Using social norming messages such as: ‘You have joined over <no. scheme name> members who benefit from easyto-understand monthly reporting and award-winning customer service.’

Provider activities We asked providers about their efforts to attract new members, including the customers of other KiwiSaver providers. Two providers ran substantial active campaigns: one involved TV, billboards,

14

and online and social activity, and one focused on a data-driven online approach. However, most providers ran more modest campaigns, such as customer emails or using branch staff or advisers to promote their KiwiSaver scheme. Providers advise they offer standardised advice, with personalised advice on request only. They use investor profile tools, and ensure staff and advisers prompt potential members to consider any benefits they will miss out on if they change schemes.

Why fees matter We don’t know how much it costs each default provider to offer default products. However, as membership grows we expect the costs per member to fall, unless overall costs rise in the market faster than we see (or hear about), or providers direct more money to provide better service. This includes increased member engagement efforts. We are not aware that this is happening currently. The tables on page 15 set out the average management fees, as well as total fees paid by default scheme members. Average fees must take into account the number of non-contributing members and under-17 year olds in default KiwiSaver schemes. This factor means it is hard to clearly state the fees paid by many members. The figures show some key themes:

• •

Average fees per member is increasing – both management fees and total fees. Management fees are a growing portion of the dollar value of overall fees. This makes sense as management fees are a percentage, while other fees are a fixed sum.

Every three years, default providers can advise the Minister of Commerce that they intend to change the fees and charges for their default products. This process is currently being run by MBIE and concludes in September 2017 (after the period of this report). We are involved in the process, and have provided fee income information to MBIE and the Minister of Commerce.


KiwiSaver annual report 2017 | Financial Markets Authority

Average fees paid by KiwiSaver members in default schemes 2012

2013 Default members

2014 Default members

Default members

447,274

464,896

461,354

Management fees per member

Management fees per member

Management fees per member

Total fees* per member

Total fees* per member

Total fees* per member

Total fees captured** by managers

Total fees captured** by managers

Total fees captured** by managers

$23.69

$28.73

$46.42

$20,922,679

$51.81

$23,987,222

2016

2015 Default members

$28.97 $63.74

$29,262,680

2017 Default members

Default members

453,795

444,786

446,534

Management fees per member

Management fees per member

Management fees per member

Total fees* per member

Total fees* per member

Total fees* per member

Total fees captured** by managers

Total fees captured** by managers

Total fees captured** by managers

$38.34 $72.20

$32,592,662

$39.30

$66.09

$29,397,953

$43.38 $70.69

$31,565,941

*Total fees include administration fees and other charges. **Includes management and administration fees, but excludes fees that are a cost to the member but not captured by the manager, such as tax and trustee fees.

15


Financial Markets Authority | KiwiSaver annual report 2017

Facts at a glance These statistics are taken from the 2017 annual statistical returns and refer to the period from 1 April 2016 to 31 March 2017 1. 20172 Number of schemes

20162

Change3

30

32

-2

Contributing members

1,572,693

1,494,231

+5.30%

Non-contributing members

1,149,454

1,114,152

+3.20%

Membership

Total members

2,722,147

2,608,383

+4.40%

$40.8 billion

$33.8 billion

+20.70%

$2.7 billion

$1.3 billion

+108.10%

$82.4 million

$77.8 million

+5.90%

$30.28

$29.84

+1.50%

$266.3 million

$219.5 million

+21.30%

Investment fees as % of returns

9.84%

16.87%

-41.70%

Average management fee per member

$97.82

$84.15

+16.20%

$3 billion

$2.6 billion

+13.70%

Lump sum contributions

$453.5 million

$393.8 million

+15.20%

Other voluntary contributions

$155.2 million

$148.7 million

+4.40%

$1.8 billion

$1.6 billion

+11%

$696.9 million

$728.3 million

-4.30%

$80.8 million

$65.2 million

+23.90%

First-home purchase

$614.4 million

$495.6 million

+24%

Aged 65 and over

$630.8 million

$513.1 million

+23%

Total membership

16.40%

17.10%

+0.40%

Total assets

11.30%

12.50%

+8.90%

Total membership

82.70%

82%

+5.30%

Total assets

86.80%

85.50%

+22.60%

0.90%

1%

-2.40%

2%

2%

+15.5%4

Assets invested Investment returns Fees Administration fees Average administration fee per member Investment management fees

Members contributions Standard contributions

Employer contributions Crown contributions Withdrawals Significant financial hardship

Default schemes

Retail schemes

Restricted schemes Total membership Total assets

1 2 Some positions stated as at 31 March 2017 (eg assets invested), others are flows to 31 March 2017 (eg returns).   Some totals may not add exactly due to 4 rounding.  3These figures are based on actual, non-rounded totals.   While the asset share of restricted scheme remained steady, total assets rose 15.5%.

16


KiwiSaver annual report 2017 | Financial Markets Authority

Appendix 1

Income and expenditure summary KiwiSaver schemes as at 31 March 2017

Default

Active

Total

4,208,822,809

29,569,413,114

33,778,235,923

Member contributions at section 64 contribution rate

445,365,641

2,537,430,658

2,982,796,299

Employer contributions

283,347,375

1,500,376,613

1,783,723,988

Crown contributions (section 226) and fee subsidies

Opening balance of scheme assets at start of annual return year Categories of income for annual return year

104,646,954

592,248,052

696,895,006

Transfers of members’ accumulations into scheme from other KiwiSaver schemes

7,788,796

1,974,781,097

1,982,569,893

Transfers of members’ accumulations into scheme from registered superannuation schemes

3,122,527

52,847,563

55,970,090

Transfers of members’ accumulations into scheme from Australian superannuation schemes

8,020,579

108,520,373

116,540,952

12,553,889

440,951,609

453,505,498

Lump sum contributions Other voluntary contributions over section 64 contribution rate Income from investment of scheme assets Other income Total income from annual return year

6,278,712

148,875,576

155,154,288

216,005,437

2,491,073,451

2,707,078,888

8,594,046

22,144,856

30,738,902

1,095,723,956

9,869,249,849

10,964,973,805

57,561,447

556,836,944

614,398,391

Categories of expenditure for annual return year First home purchase withdrawals Mortgage diversion withdrawals

3,072

146,444

149,516

51,862,591

578,934,584

630,797,175

Withdrawals on death

4,222,106

39,542,123

43,764,229

Serious illness withdrawals

4,394,272

27,738,752

32,133,024

Withdrawals or transfers on permanent emigration

4,099,348

23,537,254

27,636,602

Significant financial hardship withdrawals

8,128,331

72,707,762

80,836,093

529,304,132

1,461,502,234

1,990,806,366

422,965

2,638,978

3,061,943

KiwiSaver end payment date withdrawals

Transfer of members’ accumulations out of scheme into other KiwiSaver schemes Transfer of members’ accumulations out of scheme into Australian superannuation schemes Amounts required to be paid under other enactments

277,325

2,700,190

2,977,515

Invalid enrolments

2,970,454

2,702,586

5,673,040

Administration fees

12,193,487

70,232,840

82,426,327

Investment management fees

19,589,370

246,691,266

266,280,636

Trustee fees Taxation Other scheme expenses Total expenditure for annual return year Closing balance of scheme assets at end of annual return year Notes: The statistical returns are unaudited and may not include all transactions. Some providers are not able to differentiate between types of transfers. This means there are sometimes discrepancies between transfers to and from KiwiSaver schemes. Opening balances do not agree with last year’s report, closing balances due to the change to accrued accounting.

457,088

5,171,659

5,628,747

25,377,379

140,752,739

166,130,118

118,608

28,195,624

28,314,232

720,981,976

3,260,031,979

3,981,013,954

4,583,564,790

36,178,630,983

40,762,195,773

In the current year 30,526 members withdrew for the purposes of first-home purchase (108,043 members since inception). In the current year 13,970 members withdrew funds due to significant hardship (67,672 members since inception).

17


Financial Markets Authority | KiwiSaver annual report 2017

Appendix 2

Membership summary KiwiSaver schemes as at 31 March 2017

Default members Number of contributing members at start of annual return year

Active

Total

240,520

1,253,711

1,494,231

66,307

88,224

154,531

4,241

10,997

15,238

34,564

153,394

187,958

Members transferring into scheme from other KiwiSaver schemes

427

160,406

160,833

Members transferring into scheme from Australian superannuation schemes

121

2,482

2,603

Members transferring into scheme from registered superannuation schemes

45

527

572

105,705

416,030

521,735

2,181

18,111

20,292

Deaths

404

2,401

2,805

Permanent emigration exits

387

1,511

1,898

58,253

113,764

172,017

27

109

136

Other permanent exits*

1,545

2,860

4,405

Invalid enrolments

2,355

863

3,218

Members starting section 104 contribution holidays

6,808

26,817

33,625

33,471

171,406

204,877

Total temporary and permanent exits for annual return year

105,431

337,842

443,273

Number of contributing members at end of annual return year

240,794

1,331,899

1,572,693

Categories of entries of members for annual return year New members (other than transfers from other schemes) Members restarting contributions at end of section 104 contribution holidays Members restarting contributions after stopping contributions for any other reason

Total member entries for annual return year Categories of membership exits for annual return year KiwiSaver end payment date exits

Transfers out of scheme into other KiwiSaver schemes Transfers out of scheme into Australian superannuation schemes

Member stopping contributions for other reasons

Note: *Mainly covers withdrawals due to illness.

18


KiwiSaver annual report 2017 | Financial Markets Authority

Default members

Active

Total

27,973

77,812

105,785

Members starting section 104 contribution holidays

6,808

26,817

33,625

Members ending section 104 contribution holidays and restarting contributions

4,241

10,997

15,238

Members ending section 104 contribution holidays but not restarting contributions for any reason

6,436

13,646

20,082

24,104

79,986

104,090

176,293

832,087

1,008,380

Members stopping contributions without section 104 contribution holidays

39,907

185,050

224,957

Members restarting contributions after having stopped contributions without section 104 contribution holidays

34,564

153,409

187,973

Number of other non-contributing members (not on section 104 contribution holidays) at end of annual return year

181,636

863,728

1,045,364

Total number of members at end of annual return year

446,534

2,275,613

2,722,147

Non-contributing members on section 104 contribution holidays Number of members on section 104 contribution holidays at start of annual return year

Number of members on section 104 contribution holidays at end of annual return year Other non-contributing members (not on section 104 contribution holidays) Number of other non-contributing members (not on section 104 contribution holidays) at start of annual return year

Note: Some providers currently have an inability to differentiate between types of transfers, therefore there are discrepancies in transfers to and transfers from KiwiSaver schemes. There are also timing differences.

19


Financial Markets Authority | KiwiSaver annual report 2017

Appendix 3

Age and gender profile of members KiwiSaver schemes as at 31 March 2017

Default members Age at end of annual return year

Female

Male

Unknown gender

Total default members

3,780

3,656

261

7,697

18-25

33,855

38,791

1,391

74,037

26-30

29,562

31,977

442

61,981

31-35

27,690

28,779

388

56,857

36-40

23,644

23,886

322

47,852

41-45

23,643

22,709

245

46,597

46-50

23,458

21,338

217

45,013

51-55

20,634

18,722

185

39,541

56-60

16,808

15,253

142

32,203

61-65

11,603

10,912

69

22,584

66-70

4,551

4,635

19

9,205

71-75

1,025

1,028

1

2,054

76-80

2

0

3

5

396

506

6

908

220,651

222,192

3,691

446,534

17 and under

Unknown age Totals

Active members Age at end of annual return year

Female

Male

Unknown gender

Total active members

17 and under

157,203

165,055

1,188

323,446

18-25

170,260

176,169

652

347,081

26-30

122,363

124,432

331

247,126

31-35

104,671

101,972

394

207,037

36-40

93,979

87,503

397

181,879

41-45

97,602

87,165

405

185,172

46-50

102,280

88,136

372

190,788

51-55

100,602

87,113

296

188,011

56-60

92,857

79,618

244

172,719

61-65

77,817

67,521

237

145,575

66-70

35,242

32,600

144

67,986

71-75

9,434

8,917

88

18,439

76-80

2

2

0

4

71

131

148

350

1,164,383

1,106,334

4,896

2,275,613

Unknown age Totals

20


KiwiSaver annual report 2017 | Financial Markets Authority

Total members Age at end of annual return year

Female

Male

Unknown gender

Total KiwiSaver members

17 and under

160,983

168,711

1,449

331,143

18-25

204,115

214,960

2,043

421,118

26-30

151,925

156,409

773

309,107

31-35

132,361

130,751

782

263,894

36-40

117,623

111,389

719

229,731

41-45

121,245

109,874

650

231,769

46-50

125,738

109,474

589

235,801

51-55

121,236

105,835

481

227,552

56-60

109,665

94,871

386

204,922

61-65

89,420

78,433

306

168,159

66-70

39,793

37,235

163

77,191

71-75

10,459

9,945

89

20,493

76-80

4

2

3

9

Unknown age Totals

467

637

154

1,258

1,385,034

1,328,526

8,587

2,722,147

Number of members

Scheme assets held for those members ($)

67,611

86,737,154.80

141,926

1,117,318,562.63

Appendix 4

Profile of new default and other members KiwiSaver schemes as at 31 March 2017

Default members allocated to scheme by Commissioner under section 51 in annual return year Other new members entering scheme in annual return year (including transfers from other schemes and active choice members) Note: Some providers have included members who have since opted out whilst others have not.

21


Financial Markets Authority | KiwiSaver annual report 2017

Appendix 5

Summary of non-contributing members (not on section 104 contribution holidays) KiwiSaver schemes as at 31 March 2017

Number of default members

Scheme assets held for those members ($)

Number of active members

Scheme assets held for those members ($)

Number of non-contributing members (not on section 104 contribution holidays) at start of annual return year

176,293

926,915,170

832,074

4,734,051,847

Number of non-contributing members (not on section 104 contribution holidays) at end of annual return year

181,636

1,025,892,728

863,728

6,336,205,863

Note: Non-contributing member means: –– A member for whom no contributions have been received in the previous two months or –– Where the member does not contribute via the IRD, the member has failed to meet their contracted contribution frequency.

Appendix 6

Investment fund summary KiwiSaver schemes as at 31 March 2017 Investment funds

Number of members in each investment fund

Amount in each investment fund

Default

446,534

4,583,564,790

Totals

446,534

4,583,564,790

Active default

284,691

3,498,584,213

Conservative

602,587

6,922,865,751

Balanced

643,688

10,936,479,982

Growth

943,453

11,863,256,411

Single sector funds Cash

289,620

1,616,038,889

Shares

48,197

432,130,816

Fixed interest

25,622

155,927,666

Property

5,401

41,278,137

Socially responsible

7,151

72,411,724

Other  

47,512

639,657,394

Totals

2,897,922

36,178,630,983

Notes: T he statistical returns are unaudited and may not include all transactions.   Some members will be invested in more than one investment fund.  “Other” refers, in the main, to life stages products. 22


KiwiSaver annual report 2017 | Financial Markets Authority

Appendix 7A

Switches out of default investment product into other investment funds 1 KiwiSaver schemes as at 31 March 2017 Switches in annual return year

Switches out of default investment product under instrument of appointment

Number of members out of default investment product

Number of members into other funds

16,902

Amount ($) out of default investment product

Amount ($) into other funds

172,707,108

Switches into other investment funds Conservative

4,473

56,139,865

Balanced

6,790

58,744,324

Growth

6,747

44,678,648

405

4,419,368

Cash

639

5,212,737

Shares

947

2,868,528

Fixed Interest

12

19,915

Property

16

84,758

Socially Responsible

55

464,524

Other2

47

64,737

Active default Single sector funds

Total of switches into other investment funds

16,902

20,131

172,707,108

172,697,404

Note: Switches out includes members making an active choice to switch out of their provider’s default fund into another of the provider’s funds, and members who make an active choice to remain in the default fund. Note that some providers are currently unable to report both, so the total shown is likely to be understated.   2 Refers, in the main, to life stages products.

1

23


Financial Markets Authority | KiwiSaver annual report 2017

Appendix 7B

Switches between investment funds KiwiSaver schemes as at 31 March 2017

Switches into investment funds in annual return year

Investment funds

Number of switches

Amount ($)

Switches out of investment funds in annual return year

Number of switches

Amount ($)

Net change in amounts ($)

Active default

2,246

19,873,390

2,904

19,962,507

-89,117

Conservative

25,324

362,452,206

32,713

407,591,255

-45,139,049

Balanced

42,763

615,765,531

39,801

606,795,993

8,969,538

Growth

43,713

466,202,839

37,437

512,336,519

-46,133,680

13,821

189,162,362

11,433

113,812,651

75,349,711

Shares

9,404

45,473,532

9,508

44,580,464

893,068

Fixed Interest

2,189

17,329,198

2,906

17,309,276

19,922

Property

1,625

8,346,000

1,690

9,734,391

-1,388,391

Single sector funds Cash

Socially Responsible

318

4,809,937

63

755,889

4,054,048

Other3

616

5,845,588

437

5,820,774

2,914,802

142,019

1,725,260,583

138,892

1,738,699,719

-3,439,136

Total of switches between funds Notes: 3

Refers, in the main, to Life stages products.

Difference in cash-flow is due to deduction of PIE tax before re-investment.

24


KiwiSaver annual report 2017 | Financial Markets Authority

Appendix 8

Profile of switches between investment funds KiwiSaver schemes as at 31 March 2017 How many switches between investment funds made in annual return year

Number of members who made those switches Default

Active

15,748

82,104

1 switch 2 switches

6,580

3 switches

1,449

4 switches

539

5 switches or more

497

Appendix 9

Analysis according to size of scheme assets KiwiSaver schemes as at 31 March 2017 Assets grouping

Number of schemes

Total assets $m

Total membership

Under $10m

3

15.41

1,618

$10m to under $100m

4

156.98

7,063

$100m to under $500m

8

1,866.33

96,923

$500m to under $1,000m $1,000m to under $5,000m $5,000m and over Total

3

1,983.06

60,168

10

22,833.82

1,506,550

2

13,906.60

1,049,825

30

40,762.20

2,722,147

Notes: The data has been obtained from statistical returns made by the trustees of KiwiSaver schemes 'registered' under the KiwiSaver Act 2006. Some totals may not be exact, due to rounding.

25


Financial Markets Authority | KiwiSaver annual report 2017

Appendix 10

Analysis by nature of scheme KiwiSaver schemes as at 31 March 2017 Nature of scheme

Default schemes

Number of schemes

Total assets $millions*

Total membership

9

4,583.6

446,534

Retail (active choice)

25

35,379

2,250,378

Restricted schemes

5

799.6

25,235

30

40,762.20

2,722,147

Total Notes:

Default schemes statistics are only in respect of members and assets in the default investment fund option.   Retail (active choice) total assets and total membership figures include that portion of the default schemes where members have actively chosen to participate.   The data has been obtained from statistical returns made by the trustees of KiwiSaver schemes 'registered' under the KiwiSaver Act 2006 to the members and beneficiaries of those schemes.   Some totals may not be exact, due to rounding. * See note 1 on page 24

26


KiwiSaver annual report 2017 | Financial Markets Authority

Appendix 11A

Analysis according to nature of scheme and size of scheme assets KiwiSaver schemes as at 31 March 2017 Number of schemes Assets grouping

Retail

Restricted schemes

Total

Under $10m

2

1

3

$10m to under $100m

2

2

4

$100m to under $500m

7

1

8

$500m to under $1,000m

4

1

5

$1,000m to under $5,000m

8

8

$5,000m and over

2

2

Total (all groups)

25

5

30

Retail

Restricted schemes

Total

9.32

6.09

15.41

107.96

49.02

357.56

Total assets ($ millions) Assets grouping

Default

Under $10m $10m to under $100m

201.60

$100m to under $500m

1,660.08

206.25

1,866.33

$500m to under $1,000m

2,218.90

2,808.04

538.24

5,565.12

$1,000m to under $5,000m

2,163.10

17,956.80

20,120.96

12,836.80

12,836.82

$5,000m and over Total, all groups

4,583.60

35,379.00

799.6

40,762.20

27


Financial Markets Authority | KiwiSaver annual report 2017

Appendix 11B

Analysis according to nature of scheme and size of scheme assets KiwiSaver schemes as at 31 March 2017 Total membership Assets grouping

Default

Under $10m $10m to under $100m

56,295

$100m to under $500m

Retail

Restricted schemes

Total

1,049

569

1,618

5,110

1,953

63,358

88,795

8,128

96,923

$500m to under $1,000m

201,888

92,686

14,585

309,159

$1,000m to under $5,000m

188,351

1,096,106

1,284,457

966,632

966,632

$5,000m and over Total, all groups

446,534

2,250,378

25,235

2,722,147

Notes: Default schemes are included.  Default schemes statistics are only in respect of members and assets in the default investment fund option.   Retail (active choice) total assets and total membership figures include that portion of the default schemes where members have actively chosen to participate.  The data has been obtained from statistical returns made by the trustees of KiwiSaver schemes "registered' under the KiwiSaver Act 2006 relating to the members and beneficiaries of those schemes.   Some totals may not be exact,due to rounding.

28


AUCKLAND Level 5, Ernst & Young Building 2 Takutai Square, Britomart PO Box 106 672, Auckland 1143 Phone: +64 9 300 0400 Fax: +64 9 300 0499

WELLINGTON Level 2, 1 Grey Street PO Box 1179, Wellington 6140 Phone: +64 4 472 9830 Fax: +64 4 472 8076

FMA KiwiSaver Annual Report 2017  

FMA KiwiSaver Annual Report 2017